If you don’t have an actual plan for how to achieve retirement successfully, you may just be “winging it”! Really?! How do you think that’s going to work out for you?
It’s true that while many may participate in their company’s 401(k) plan or another workplace retirement plan, many workers don’t know what to invest in or how much to save. As a result, they’re not saving enough. Additionally, surveys have shown that many workers feel overwhelmed by day-to-day financial pressures, paying monthly expenses and even job security. These only contribute to taking your eye off the ball! The result…a secure retirement Strikeout!
Consider this: According to Fidelity, the average 65-year-old couple retiring today will spend about $220,000 on health-care costs alone.
Reality is setting in with American workers. Recent polls have suggested that while half of Americans say they would like to retire before the age of 65, only 20 percent believe they will realistically be able to do so. This leaves two options: working longer or saving more.
But how much more should you save?
Determining the amount of money you may need in retirement as income is an vital factor in calculating how much you may need to save today.
Fidelity took a look at how much 401(k) investors at various ages would need to save for every $1,000 they’ll need to generate in retirement income to make their money last, assuming a 5.5 percent annual return and not taking taxes into account. The analysis had eye opening results:
That’s why financial planners suggest that the rule of thumb is you should save anywhere from 10 to 15 percent of your income towards retirement. Yet, most workers are only putting away 6 to 7 percent of the annual income into a 401(k) or workplace retirement plan, the firm has found. Some who have delayed retirement savings may have to put away 20 to 25 percent of their income.
Can’t get there yet? Smaller increases can help. Even incremental changes like a 1 percent increase can eventually make a big difference and create hundreds of dollars in potential income in retirement.
The bottom line is that most people aren’t saving enough money. In the absence of saving an adequate amount there is no other magic bullet. You cannot start so late that assuming more risk will make up for the lack of contributions. Not to mention that more risk could mean more potential losses if the market changes. Surely that will be the fastball that sends the batter down swinging. You can choose the best investments in the world but if your only putting $500 a year into your IRA or your 401(k) plan you’re just not going to get there.
The information contained herein does not constitute tax or legal advice. Any decisions or actions should not be made without first consulting a CFP, CPA or attorney.
For more information contact us at 845.563.0537 or Contact@CompassAMG.com
The author of this blog, Steven M DiGregorio is President of Compass Asset Management Group, LLC and an Investment Advisor Representative with Spire Wealth Management, LLC.
Spire Wealth Management, LLC is a Federally Registered Investment Advisory Firm. Securities offered through an affiliate, Spire Securities, LLC. Member FINRA/SIPC.
Tags: 401(k), 403(b), 457, investing, investment strategies, investments, IRA, mutual funds, pension, portfolio, retirement, retirement income, retirement plan, Retirement Planning, Rollover, rollover IRA, ROTH, social security